<PAGE>   1


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


                                   (Mark One)

     (x) Quarterly report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934
                  For the quarterly period ended MAY 31, 1999

                                       OR

    ( ) Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934
                For the transition period from              to
                                              -------------    -------------

                         Commission file number 0-19095

                             SOMANETICS CORPORATION
             (Exact name of registrant as specified in its charter)

                  MICHIGAN                                    38-2394784
     (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                       Identification No.)


                              1653 EAST MAPLE ROAD,
                                 TROY, MICHIGAN
                                   48083-4208
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (248) 689-3050
              (Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that the
     registrant was required to file such reports), and (2) has been subject to
     such filing requirements for the past 90 days.

                 Yes          X                No
                    ---------------------         -------------------------

         Number of common shares outstanding at June 30, 1999: 6,035,597


<PAGE>   2





                          PART I FINANCIAL INFORMATION

                             SOMANETICS CORPORATION



                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    May 31,                November 30,
                                                                                     1999                      1998
ASSETS                                                                          ---------------           ---------------
CURRENT ASSETS:                                                                   (Unaudited)                (Audited)
<S>                                                                             <C>                       <C>
    Cash and cash equivalents..........................................         $       929,169           $     1,976,829
    Marketable securities..............................................               3,281,299                 4,916,942
    Accounts receivable, net of allowance for doubtful accounts of
       approximately $0 and $153,000 at May 31, 1999 and
       November 30, 1998, respectively.................................                 819,830                   615,682
    Inventory, net.....................................................                 604,174                   660,964
    Prepaid expenses...................................................                 109,340                    92,050
                                                                                ---------------           ---------------
       Total current assets............................................               5,743,812                 8,262,467
                                                                                ---------------           ---------------
PROPERTY AND EQUIPMENT (at cost):
    Machinery and equipment............................................               1,427,793                 1,309,539
    Furniture and fixtures.............................................                 184,949                   184,949
    Leasehold improvements.............................................                 166,770                   166,770
                                                                                ---------------           ---------------
       Total...........................................................               1,779,512                 1,661,258
    Less accumulated depreciation and amortization.....................              (1,093,588)                 (957,083)
                                                                                ----------------          ---------------
       Net property and equipment......................................                 685,924                   704,175
                                                                                ---------------           ---------------
OTHER ASSETS:
    Patents and trademarks, net........................................                  61,849                    65,305
    Other..............................................................                  15,000                    15,000
                                                                                ---------------           ---------------
       Total other assets..............................................                  76,849                    80,305
                                                                                ---------------           ---------------
TOTAL ASSETS...........................................................         $     6,506,585           $     9,046,947
                                                                                ===============           ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable...................................................         $       269,539           $       262,932
    Accrued liabilities................................................                 296,216                   366,222
                                                                                ---------------           ---------------
       Total current liabilities.......................................                 565,755                   629,154
                                                                                ---------------           ---------------
COMMITMENTS AND CONTINGENCIES..........................................                  -                         -
SHAREHOLDERS' EQUITY:
    Preferred shares; authorized, 1,000,000 shares of $.01 par value;
       no shares issued or outstanding.................................                  -                         -
    Common shares; authorized, 20,000,000 shares of $.01 par value;
       issued and outstanding, 6,035,597 shares at May 31, 1999 and
       November 30, 1998, respectively.................................                  60,356                    60,356
    Additional paid-in capital.........................................              50,290,067                50,290,067
    Accumulated unrealized losses on investments.......................                (123,310)                  (96,262)
    Accumulated deficit................................................             (44,286,283)              (41,836,368)
                                                                                ---------------           ---------------
    Total shareholders' equity...-.....................................               5,940,830                 8,417,793
                                                                                ---------------           ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................         $     6,506,585           $     9,046,947
                                                                                ===============           ===============
</TABLE>

                        See notes to financial statements

                                       2
<PAGE>   3


                             SOMANETICS CORPORATION

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                 Three Months                   Six Months
                                                 Ended May 31,                  Ended May 31,
                                           --------------------------    --------------------------
                                              1999           1998           1999            1998
                                           -----------    -----------    -----------    -----------
<S>                                        <C>            <C>            <C>            <C>
NET REVENUES.............................. $ 1,041,479    $   510,687    $ 1,952,217    $ 1,314,052
COST OF SALES.............................     518,859        300,878        965,947        690,876
GROSS MARGIN..............................     522,620        209,809        986,270        623,176
                                           -----------    -----------    -----------    -----------

OPERATING EXPENSES:
   Research, development and engineering       144,033        163,837        286,482        328,625
   Selling, general and administrative....   1,724,375      1,490,515      3,323,231      2,971,086
                                           -----------    -----------    -----------    -----------
       Total operating expenses...........   1,868,408      1,654,352      3,609,713      3,299,711
                                           -----------    -----------    -----------    -----------

OPERATING LOSS............................  (1,345,788)    (1,444,543)    (2,623,443)    (2,676,535)
                                           -----------    -----------    -----------    -----------
OTHER INCOME (EXPENSE):
   Interest income........................      80,201         85,985        173,528        136,777
   Other..................................        --             --             --            8,100
                                           -----------    -----------    -----------    -----------
      Total other income..................      80,201         85,985        173,528        144,877
                                           -----------    -----------    -----------    -----------
NET LOSS.................................. $(1,265,587)   $(1,358,558)   $(2,449,915)   $(2,531,658)
                                           -----------    -----------    -----------    -----------

NET LOSS PER COMMON SHARE -
    BASIC AND DILUTED..................... $     (0.21)   $     (0.26)   $     (0.41)   $     (0.53)
                                           -----------    -----------    -----------    -----------

WEIGHTED AVERAGE SHARES
    OUTSTANDING...........................   6,035,597      5,312,620      6,035,597      4,804,621
                                           ===========    ===========    ===========    ===========
</TABLE>



                       See notes to financial statements


                                       3
<PAGE>   4


                             SOMANETICS CORPORATION

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                               For the Six Month
                                                              Periods Ended May 31,
                                                              ---------------------
                                                             1999             1998
                                                             ----             ----
<S>                                                       <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ............................................... $ (2,449,915)   $ (2,531,658)
  Adjustments to reconcile net loss to net cash used in
    operations:
      Depreciation and amortization ......................       68,986          47,952
      Changes in assets and liabilities:
          Accounts receivable (increase) .................     (204,148)       (307,124)
          Inventory (increase) decrease ..................       56,790        (474,279)
          Prepaid expenses (increase) decrease ...........      (17,290)         20,173
          Other assets decrease ..........................           --           1,600
          Accounts payable increase (decrease) ...........        6,607         (81,136)
          Accrued liabilities (decrease) .................      (70,006)        (14,016)
                                                           ------------    ------------
            Net cash (used in) operations ................   (2,608,976)     (3,338,488)
                                                           ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of marketable securities ...........    1,608,595       2,470,780
  Acquisition of property and equipment (net) ...........      (47,279)       (264,538)
                                                           -----------     -----------
            Net cash provided by investing activities....    1,561,316       2,206,242
                                                           -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of Common Shares ...............          --        9,094,931
                                                           -----------    ------------
             Net cash provided by financing activities...          --        9,094,931
                                                           -----------    ------------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS ...........................................   (1,047,660)      7,962,685

CASH AND CASH EQUIVALENTS, BEGINNING
  OF PERIOD .............................................    1,976,829       2,132,376
                                                          ------------    ------------
CASH AND CASH EQUIVALENTS, END
  OF PERIOD ............................................. $    929,169    $ 10,095,061
                                                          ============    ============
</TABLE>


                       See notes to financial statements



                                       4
<PAGE>   5


                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                  MAY 31, 1999



1.   ORGANIZATION AND OPERATIONS

     Somanetics Corporation (the "Company"), a Michigan corporation formed
in January 1982, develops, manufactures and markets the INVOS(R) Cerebral
Oximeter (the "Cerebral Oximeter"), the only FDA-cleared, non-invasive patient
monitoring system that continuously measures changes in the blood oxygen level
in the adult brain. The Cerebral Oximeter is based on the Company's proprietary
In Vivo Optical Spectroscopy ("INVOS(R)") technology. INVOS analyzes various
characteristics of human blood and tissue by measuring and analyzing
low-intensity visible and near infrared light transmitted into portions of the
body. The Company has incurred research, product development and other expenses
involved in designing, developing, marketing and selling its product, as well as
devoting efforts to raising capital.

2.   FINANCIAL STATEMENT PRESENTATION

     The accompanying unaudited interim financial statements of Somanetics
Corporation have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, such financial statements do
not include all of the information and footnotes normally included in the
Company's annual financial statements prepared in accordance with generally
accepted accounting principles, although the Company believes that the
disclosures are adequate to make the information presented not misleading.

     The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. All such adjustments
are of a normal recurring nature, except those not material to the Company's
financial condition or results of operations. Operating results for the
six-month period ended May 31, 1999, are not necessarily indicative of the
results that may be expected for the year ending November 30, 1999, although the
Company expects to continue to incur operating losses for the foreseeable
future. The unaudited interim financial statements should be read in conjunction
with the financial statements and footnotes thereto for the year ended November
30, 1998 included in the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1998.

     The Company has not achieved sales necessary to support operations. The
Company has incurred an accumulated deficit of $44,286,283 through May 31, 1999.
The Company had working capital of $5,178,057, cash, cash equivalents and
marketable securities of $4,210,468, total current liabilities of $565,755 and
shareholders' equity of $5,940,830 as of May 31, 1999.

     Management believes that markets exist for the product the Company has
developed; however, there is an inherent uncertainty associated with the success
of such product. The likelihood of success of the Company must be considered in
view of the Company's limited resources and current financial condition, the
problems and expenses frequently encountered in connection with formation of a
new business, the ability to raise new funds, the development and application of
new technology, and the competitive environment in which the Company operates.

                                       5
<PAGE>   6


                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                  MAY 31, 1999


     The net proceeds from the public offering of Common Shares in April
1998 were sufficient to fund the Company's working capital requirements for the
six months ended May 31, 1999. Current sales are not sufficient to fund
operations.

     The Company believes that the cash, cash equivalents and marketable
securities on hand at May 31, 1999 will be sufficient to sustain the Company's
operations at budgeted levels and its needs for liquidity into the second
quarter of fiscal 2000. By that time the Company will be required to raise
additional cash either through additional sales of its product, through sales of
securities, by incurring indebtedness or by some combination of the foregoing.
If the Company is unable to raise additional cash by that time, it will be
required to reduce or discontinue its operations.

     The estimated length of time current cash, cash equivalents and
marketable securities will sustain the Company's operations is based on certain
estimates and assumptions made by the Company. Such estimates and assumptions
are subject to change as a result of actual experience. There can be no
assurance that actual capital requirements necessary to market the Cerebral
Oximeter and SomaSensor, to develop enhancements to, and product extensions of,
the Cerebral Oximeter, to conduct research and development concerning additional
potential applications of the Company's technology and for working capital will
not be substantially greater than current estimates.

     The Company does not believe that product sales will be sufficient to
fund the Company's operations in fiscal 1999.

     As of May 31, 1999, there were 60,400 redeemable warrants outstanding,
exercisable at $20.00 per share until July 13, 2000, and 55,120 redeemable
warrants outstanding exercisable at $17.50 per share until April 1, 2001. These
warrants were issued in the Company's 1995 and 1996 Regulation S securities
offerings. The conditions permitting the Company to redeem these warrants have
not been met as of June 24, 1999. In addition, the placement agents and their
transferees hold warrants to purchase 64,394 Common Shares exercisable at $12.50
per share and 15,000 warrants exercisable at $14.40 per share. Also, the
underwriter of the June 1997 public offering received warrants to purchase
200,000 Common Shares exercisable at $4.80 per share. It is unlikely that these
warrants will be exercised if the exercise price exceeds the market price of the
Common Shares.

     On April 1, 1999, the Company renewed its $2,000,000 Revolving Note and
a Pledge Agreement with Fifth Third Bank of Northwestern Ohio, N.A. The
principal amount outstanding under the note bears interest, payable monthly, at
the bank's prime rate (7.75% as of June 24, 1999), is collateralized by all
property of the Company held at the bank and, upon drawing against the line of
credit, by any securities account of the Company up to the value of the loan,
and is intended to be used for general corporate purposes, if necessary. The
Company has not borrowed any money under the line of credit. The line of credit
expires March 31, 2000. Before that date, the bank may, but is not obligated to,
lend the Company such amounts as may from time to time be requested by the
Company, up to $2,000,000 if no Event of Default shall exist. Events of default
include failure to furnish satisfactory additional security on demand or the
bank deeming itself insecure. The Company has no other loan commitments.

     There can be no assurance that even if the Company receives additional
capital, it will be able to achieve the level of sales necessary to sustain its
operations. There can be no assurance that the Company will be able to obtain
any funds on terms acceptable to the Company and at times required by the
Company through sales of the Company's product, sales of securities or loans in
sufficient quantities. The report of the Company's Independent Auditors in the
Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1998
contains an explanatory paragraph relating to an uncertainty concerning the
Company's ability to continue as a going concern.



                                       6


<PAGE>   7

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                  MAY 31, 1999


     These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.

3.   STOCK OPTIONS

     On January 21, 1999, the Company's Board of Directors approved an
amendment to the Somanetics Corporation 1997 Stock Option Plan to increase the
number of Common Shares reserved for issuance pursuant to the exercise of
options granted under the 1997 Plan by 295,000, from 745,000 to 1,040,000
shares, subject to shareholder approval at the 1999 Annual Meeting of
Shareholders. The Company's shareholders approved such amendment at the 1999
Annual Meeting of Shareholders on April 13, 1999.

     Effective April 13, 1999, the Company granted to four directors of the
Company who are not officers or employees of the Company ten-year options under
the 1997 Stock Option Plan to purchase an aggregate of 8,000 Common Shares at an
exercise price of $1.88 per share (the closing sale price of the Common Shares
as of the date of grant). In addition, effective May 20, 1999, the Company
granted 10-year options under the 1997 Stock Option Plan to purchase 217,400
Common Shares to 24 employees and one consultant of the Company at an exercise
price of $3.56 per share (the closing sale price of the Common Shares as of the
date of grant).

4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Marketable Securities consist seventy-five percent of AAA rated
corporate bonds and twenty-five percent of lower rated, fixed income securities,
classified as available for sale, maturing approximately three months to one
year from the date of acquisition and are stated at the lower of cost or fair
market value.

     Inventory is stated at the lower of cost or market on a first-in,
first-out (FIFO) basis. Inventory consists of:

<TABLE>
<CAPTION>

                                          May 31, 1999        November 30, 1998
                                          ------------        -----------------

<S>                                       <C>                 <C>
     Finished goods...................    $   43,608          $  224,313
     Work in process..................       157,464             226,554
     Purchased components.............       527,249             348,321
                                          -----------         ----------
       Sub-total......................       728,321             799,188
     Less reserve for obsolete
      and excess inventory............      (124,147)           (138,224)
                                          -----------         -----------
     Total...........................     $  604,174          $  660,964
                                          ==========          ==========
</TABLE>


     Patents and Trademarks are recorded at cost and are being amortized on
the straight-line method over 17 years. Accumulated amortization was $49,884 and
$46,428 at May 31, 1999 and November 30, 1998, respectively.

     Loss Per Common Share - basic and diluted, is computed using the
weighted average number of common shares outstanding during each period. Common
Shares issuable under stock options and warrants have been considered in the
computation of the net loss per Common Share - diluted, but have not been
included because such inclusion would be antidilutive. As of May 31, 1999 and
May 31,1998, the Company had outstanding 1,612,851 and 1,404,781, respectively,
of warrants and options to purchase Common Shares.


                                       7

<PAGE>   8

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                  MAY 31, 1999


5.   ACCRUED LIABILITIES

     Accrued liabilities consist of the following:
<TABLE>
<CAPTION>

                                                    May 31, 1999             November 30, 1998
                                                    ------------             -----------------

<S>                                                  <C>                         <C>
     Professional Fees.......................        $ 55,925                    $ 112,902
     Clinical Research.......................            -                          19,165
     Product Upgrades........................          21,297                       21,297
     Warranty................................          30,150                       37,487
     Accrued Insurance.......................          10,340                       42,204
     Accrued Incentive.......................          81,909                       34,000
     Accrued Sales Commissions...............          96,595                       99,167
                                                     --------                    ---------
          Total..............................        $296,216                    $ 366,222
                                                     ========                    =========
</TABLE>


6.   COMMITMENTS AND CONTINGENCIES


     The Company may become subject to product liability claims by patients
or physicians, and may become a defendant in product liability or malpractice
litigation. The Company has obtained product liability insurance and an umbrella
policy. There can be no assurance that the Company will be able to maintain such
insurance or that such insurance would be sufficient to protect the Company
against such product liability.


                                       8
<PAGE>   9


                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                  MAY 31, 1999

     The following Management's Discussion and Analysis of Financial
Condition and Results of Operations includes forward-looking statements with
respect to the Company's future financial performance. These forward-looking
statements are subject to various risks and uncertainties, including the factors
described under the caption "Risk Factors" and elsewhere in the Company's
Registration Statement on Form S-1 (file no. 333-47225) effective April 2, 1998
and elsewhere in this Report, that could cause actual results to differ
materially from historical results or those currently anticipated.

RESULTS OF OPERATIONS

OVERVIEW

     Somanetics Corporation develops, manufactures and markets the INVOS
Cerebral Oximeter, the only FDA-cleared, non-invasive patient monitoring system
that continuously measures changes in the blood oxygen level in the adult brain.
In June 1996, the Company received clearance from the FDA to market the Cerebral
Oximeter and the related disposable SomaSensor in the United States. In October
1997, the Company obtained FDA clearance for new advances in its INVOS
technology that are incorporated in its model 4100 Cerebral Oximeter. The model
4100 Cerebral Oximeter was introduced in October 1997 and shipments began in the
first quarter of fiscal 1998.

     During fiscal 1998 and the first two quarters of fiscal 1999, the
Company's primary activities consisted of sales and marketing of the model 4100
Cerebral Oximeter and the related disposable SomaSensor. The Company had an
accumulated deficit of $44,286,283 through May 31, 1999. The Company believes
that its accumulated deficit will continue to increase for the foreseeable
future.

     The Company derives its revenues from sales of Cerebral Oximeters and
SomaSensors to its distributors and, since the June 1996 FDA clearance, to
hospitals in the United States through its direct sales employees. The Company
recognizes revenues when it ships its product to its distributors or to
hospitals. Payment terms are generally net 30 days for United States sales and
net 60 days or longer for international sales. The Company's primary expenses,
excluding the cost of its product, are selling, general and administrative and
research, development and engineering, which are generally expensed as incurred.
During fiscal 1998, the Company offered to exchange model 4100 Cerebral
Oximeters for model 3100A Cerebral Oximeters (which the Company scraps) and cash
equal to the difference in sales prices of the two models. Such sales reduce the
Company's average unit sales price and overall gross margin. Also, during fiscal
1998, the Company began a no-cap sales program whereby the Company ships the
model 4100 Cerebral Oximeter to the customer at no charge, in exchange for the
customer agreeing to purchase a minimum quantity of SomaSensors, on a monthly
basis, at a premium for a stated period of time. Currently, the Company expenses
the cost of the Cerebral Oximeter upon shipment, and recognizes revenue as the
SomaSensors are shipped to the customer.


                                       9
<PAGE>   10


                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                  MAY 31, 1999




THREE MONTHS ENDED MAY 31, 1999 COMPARED TO THREE MONTHS ENDED MAY 31, 1998

     Net revenues increased by approximately $531,000, or 104%, from
$510,687 in the three-month period ended May 31, 1998 to $1,041,479 in the
three-month period ended May 31, 1999. The increase in revenues was primarily
attributable to an increase in United States sales of approximately $325,000,
from approximately $281,000 in the second quarter of fiscal 1998 to
approximately $606,000 in the second quarter of fiscal 1999, and an increase in
international sales of approximately $205,000, from approximately $230,000 in
the second quarter of fiscal 1998 to approximately $435,000 in the second
quarter of fiscal 1999. The increase in net revenues is primarily attributable
to increased purchases of the disposable SomaSensor, purchases of the model 4100
Cerebral Oximeter by Baxter Limited as a result of Japanese Ministry of Health
and Welfare approval in the first quarter of fiscal 1999 to market the model
4100 in Japan, a 35% increase in the average selling price of the disposable
SomaSensor due to the effects of no-cap sales and the March 1, 1999 increase in
SomaSensor prices on average SomaSensor prices, and a 16% increase in the
average selling price of Cerebral Oximeters due to (i) a change in the mix
between sales directly to hospitals and sales through distributors, and (ii) the
March 1, 1999 increase in the price of the Cerebral Oximeter, and (iii) the
exchanges of model 4100 Cerebral Oximeters for model 3100A Cerebral Oximeters
with existing customers during the second quarter of fiscal 1998, partially
offset by no-cap sales shipments during the second quarter of fiscal 1999.
Effective March 1, 1999, the Company increased the retail price of the Cerebral
Oximeter and SomaSensor by 25% and 7%, respectively. The price increase does not
apply to sales quotations issued prior to March 1, 1999. The Company's third
quarter sales have typically been lower, compared to other fiscal quarters,
principally because the fiscal quarter coincides with the summer vacation
season, especially in Europe, the United States and Japan.

     Sales of model 4100 Cerebral Oximeters, SomaSensors, and model 4100
exchanges comprised approximately 58%, 42%, and 0%, respectively, of the
Company's net revenues in the second quarter of fiscal 1999 and 60%, 32%, and
8%, respectively, of the Company's net revenues in the second quarter of fiscal
1998. Approximately 42% of the Company's net revenues in the second quarter of
fiscal 1999 were export sales, compared to 45% of the Company's net revenues in
the second quarter of fiscal 1998. Two international distributors accounted for
approximately 19% and 14% of net revenues for the three months ended May 31,
1999, and one United States distributor and two international distributors
accounted for approximately 18%, 11% and 10%, respectively, of total net
revenues for the three months ended May 31, 1998.

     Gross margin as a percentage of net revenues for the quarters ended May
31, 1999 and May 31, 1998 was approximately 50% and 41%, respectively. Gross
margin as a percentage of net revenues increased in the second quarter ended May
31, 1999 from the second quarter of fiscal 1998 primarily because of the higher
average selling prices realized by the Company for the model 4100 Cerebral
Oximeter and the SomaSensor, and the lack of model 4100 exchanges in fiscal
1999, partially offset by the higher percentage of the Company's net revenues
derived from the sale of SomaSensors in the second quarter of fiscal 1999, which
have lower margins.

     The Company's research, development and engineering expenses decreased
approximately $20,000, or 12%, from $163,837 for the three months ended May 31,
1998 to $144,033 for the three months ended May 31, 1999. The decrease is
primarily attributable to decreased costs associated with enhancements to the
model 4100 Cerebral Oximeter, partially offset by an increase in costs
associated with the Company's new sensor development projects.



                                       10
<PAGE>   11


                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                  MAY 31, 1999


     Selling, general and administrative expenses increased approximately
$234,000, or 16%, from $1,490,515 for the three months ended May 31, 1998 to
$1,724,375 for the three months ended May 31, 1999. The increase in selling,
general and administrative expense is primarily attributable to a $142,000
increase in salaries, wages, commissions, and related expenses as a result of
the additional employees hired since May 31, 1998 (from an average of 44
employees in the second quarter of fiscal 1998 to 47 employees in the second
quarter of fiscal 1999), a $78,000 increase in professional service fees, and a
$37,000 increase in investor and public relations expenses, partially offset by
a $20,000 decrease in incentive compensation expense.

     For the three-month period ended May 31, 1999, the Company realized a
7% decrease in its net loss over the same period in fiscal 1998. The decrease is
primarily attributable to a 104% increase in net revenues, and higher gross
margins as a percentage of net revenues, partially offset by a 13% increase in
operating expenses.

SIX MONTHS ENDED MAY 31, 1999 COMPARED TO SIX MONTHS ENDED MAY 31, 1998

     Net revenues increased by approximately $638,000, or 49%, from
$1,314,052 in the six-month period ended May 31, 1998 to $1,952,217 in the
six-month period ended May 31, 1999. This increase in net revenues was primarily
attributable to an increase in United States sales of approximately $364,000,
from approximately $673,000 in the first two quarters of fiscal 1998 to
approximately $1,037,000 in the first two quarters of fiscal 1999, and an
increase in international sales of approximately $274,000, from approximately
$641,000 in the first two quarters of fiscal 1998 to approximately $915,000 in
the first two quarters of fiscal 1999. The increase in net revenues is primarily
attributable to increased purchases of the disposable SomaSensor, purchases of
the model 4100 Cerebral Oximeter by Baxter Limited as a result of Japanese
Ministry of Health and Welfare approval in the first quarter of fiscal 1999 to
market the model 4100 in Japan, a 28% increase in the average selling price of
the disposable SomaSensor due to the effects of no-cap sales and the March 1,
1999 increase in SomaSensor prices on average SomaSensor prices, and a 21%
increase in the average selling price of Cerebral Oximeters due to (i) a change
in the mix between sales directly to hospitals and sales through distributors,
(ii) the March 1, 1999 increase in the price of the Cerebral Oximeter, and (iii)
the exchanges of model 4100 Cerebral Oximeters for model 3100A Cerebral
Oximeters with existing customers during the first two quarters of fiscal 1998,
partially offset no-cap sales shipments during the first two quarters of fiscal
1999.

     Sales of model 4100 Cerebral Oximeters, SomaSensors, model 4100
exchanges, and model 3100A Cerebral Oximeters comprised approximately 61%, 39%,
0%, and 0%, respectively, of the Company's net revenues in the first two
quarters of fiscal 1999 and 62%, 21%, 11%, and 4%, respectively, of the
Company's net revenues in the first two quarters of fiscal 1998. Approximately
47% of the Company's net revenues in the first two quarters of fiscal 1999 were
export sales, compared to 49% of the Company's net revenues for the same period
in fiscal 1998. One international distributor accounted for approximately 26% of
net revenues for the six months ended May 31, 1999, and one United States
distributor and two international distributors accounted for approximately 20%,
12%, and 10%, respectively, of total net sales for the same period ended May 31,
1998.



                                       11
<PAGE>   12


                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                  MAY 31, 1999


     Gross margin as a percentage of net revenues for six-month periods
ended May 31, 1999 and May 31, 1998 was approximately 51% and 47%, respectively.
Gross margin as a percentage of net revenues increased in the six-month period
ended May 31, 1999 from the same period of fiscal 1998 primarily because of the
higher average selling prices realized by the Company for the model 4100
Cerebral Oximeter and the SomaSensor, and the lack of model 4100 exchanges in
fiscal 1999, partially offset by the higher percentage of the Company's net
revenues derived from the sale of SomaSensors in the first six months of fiscal
1999, which have lower margins.

     The Company's research, development and engineering expenses decreased
approximately $42,000, or 13%, from $328,625 for the six-month period ended May
31, 1998 to $286,482 for the six-month period ended May 31, 1999. The decrease
is primarily attributable to a $68,000 decrease in costs associated with
enhancements to the model 4100 Cerebral Oximeter, partially offset by a $24,000
increase in costs associated with the Company's new sensor development projects.

     Selling, general and administrative expenses increased approximately
$352,000, or 12%, from $2,971,086 for the six-month period ended May 31, 1998 to
$3,323,231 for the six-month period ended May 31, 1999. The increase in selling,
general and administrative expense is primarily attributable to a $337,000
increase in salaries, wages, commissions and related expenses as a result of the
additional employees hired since May 31, 1998 (from an average of 42 employees
in the six-month period ended May 31, 1998 to 48 employees in the same period of
fiscal 1999), and an $80,000 increase in professional service and investor
relations fees, partially offset by a $49,000 decrease in accrued warranty
expense for sales of new products and a $44,000 decrease in incentive
compensation expense.

     For the six-month period ended May 31, 1999, the Company realized a 3%
decrease in its net loss over the same period in fiscal 1998. The decrease is
primarily attributable to a 49% increase in net revenues, higher gross margins
as a percentage of net revenues, and increased interest income, partially offset
by a 9% increase in operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operations during the six-month period ended May 31,
1999 was approximately $2,609,000. Cash was used primarily to (i) fund the
Company's net loss, primarily selling, general and administrative expenses and
research, development and engineering expenses (approximately $2,381,000, net of
depreciation and amortization expense), (ii) increase accounts receivable
(approximately $204,000) primarily due to higher sales in the second quarter of
fiscal 1999 than in the fourth quarter of fiscal 1998, and (iii) decrease
accrued liabilities (approximately $70,000). These uses of cash were partially
offset by a decrease in inventories of the model 4100 Cerebral Oximeter and its
components (approximately $57,000), primarily due to sales in fiscal 1999.
Management expects working capital requirements to increase if sales increase.
The Company capitalized approximately $94,000 of costs for model 4100 Cerebral
Oximeters being used as demonstration units during the first two quarters of
fiscal 1999. The Company expects to depreciate these costs as a marketing
expense over three years.

     On April 1, 1999, the Company renewed its $2,000,000 Revolving Note and
a Pledge Agreement with Fifth Third Bank of Northwestern Ohio, N.A. The
principal amount outstanding under the note bears interest, payable monthly, at
the bank's prime rate (7.75% as of June 24, 1999), is collateralized by all
property of the Company held at the bank and, upon drawing against the line of
credit, by any securities account of the Company up to the value of the loan,
and is intended to be used for general corporate purposes, if necessary. The
Company has not borrowed any money under the line of credit. The line of credit
expires March 31, 2000. Before that date, the bank may, but is not obligated to,



                                       12

<PAGE>   13

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                  MAY 31, 1999

lend the Company such amounts as may from time to time be requested by the
Company, up to $2,000,000 if no Event of Default shall exist. Events of default
include failure to furnish satisfactory additional security on demand or the
bank deeming itself insecure. The Company has no other loan commitments.

     As of May 31, 1999 the Company had working capital of working capital
of $5,178,057, cash, cash equivalents and marketable securities of $4,210,468,
total current liabilities of $565,755 and shareholders' equity of $5,940,830.

     The Company believes that the cash, cash equivalents and marketable
securities on hand at May 31, 1999 will be sufficient to sustain the Company's
operations at budgeted levels and its needs for liquidity into the second
quarter of fiscal 2000. By that time the Company will be required to raise
additional cash either through additional sales of its product, through sales of
securities, by incurring indebtedness or by some combination of the foregoing.
If the Company is unable to raise additional cash by that time, it will be
required to reduce or discontinue its operations.

     The estimated length of time current cash, cash equivalents, and
marketable securities will sustain the Company's operations is based on certain
estimates and assumptions made by the Company. Such estimates and assumptions
are subject to change as a result of actual experience. There can be no
assurance that actual capital requirements necessary to market the Cerebral
Oximeter and SomaSensor, to develop enhancements to, and product extensions of,
the Cerebral Oximeter, to conduct research and development concerning additional
potential applications of the Company's technology and for working capital will
not be substantially greater than current estimates.

     The Company does not believe that product sales will be sufficient to
fund the Company's operations in fiscal 1999.

     As of May 31, 1999, there were 60,400 redeemable warrants outstanding,
exercisable at $20.00 per share until July 13, 2000, and 55,120 redeemable
warrants outstanding exercisable at $17.50 per share until April 1, 2001. These
warrants were issued in the Company's 1995 and April 1996 Regulation S
securities offerings. The conditions permitting the Company to redeem these
warrants have not been met as of June 24, 1999. In addition, the placement
agents and their transferees hold warrants to purchase 64,394 Common Shares
exercisable at $12.50 per share and 15,000 warrants exercisable at $14.40 per
share. Also, the underwriter of the June 1997 public offering received warrants
to purchase 200,000 Common Shares exercisable at $4.80 per share. It is unlikely
that these warrants will be exercised if the exercise price exceeds the market
price of the Common Shares.

     The Company's only current loan commitment is described above.

     There can be no assurance that even if the Company receives additional
capital, it will be able to achieve the level of sales necessary to sustain its
operations. There can be no assurance that the Company will be able to obtain
any funds on terms acceptable to the Company and at times required by the
Company through sales of the Company's product, sales of securities or loans in
sufficient quantities. The report of the Company's Independent Auditors in the
Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1998
contains an explanatory paragraph relating to an uncertainty concerning the
Company's ability to continue as a going concern.



                                       13

<PAGE>   14

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                  MAY 31, 1999


   YEAR 2000 COMPLIANCE

     The Company does not expect that the cost of converting its computer
systems to year 2000 compliance will be material to its financial condition or
results of operations. The Company, together with its independent network
consultant, has completed the evaluation of its hardware and software, and has
purchased the hardware and software necessary to replace what was determined to
be non-compliant. As of May 31, 1999, the Company had spent approximately
$80,000 towards the replacement of non-compliant hardware and software, and
estimates that the total costs associated with the implementation of the new
computer system, including hardware, software, and related consulting fees, will
approximate $100,000. The Company began implementation of some new hardware and
software during the fourth quarter of fiscal 1998, and completed the
implementation of the hardware and software during the first quarter of fiscal
1999. The Company is currently using the newly implemented hardware and software
in a test environment, and expects a full conversion to the new information
system by the third quarter of fiscal 1999. Because the Company expects its
system to be year 2000 compliant by the third quarter of fiscal 1999, it has not
prepared a contingency plan and does not currently believe that a contingency
plan is necessary. The Company has considered the cost of upgrading its older
products to make them year 2000 compliant, and does not believe that such costs
will be material to the Company's financial condition or results of operations.
The Company has also corresponded with its major vendors, as well as a sampling
of both its United States and international customers, to determine their state
of readiness with respect to year 2000 compliance. Based on the responses from
the vendors and customers, the Company does not anticipate any material
disruption to its operations as a result of year 2000 compliance failure, and
does not expect any material effect to its financial condition or results of
operations. Many risks, however, such as the failure to perform by public
utilites, telecommunications providers and financial institutions, and the
impact of the Year 2000 issue on the economy as a whole, are outside the
Company's control and could adversely affect the Company and its ability to
conduct its business. While the Company believes its efforts will adequately
identify and address the Year 2000 issues that are within its reasonable
control, the Year 2000 issue might still have a material adverse impact on the
Company's business, financial condition, or results of operations.



                                       14


<PAGE>   15
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates, consisting of
investments in corporate bonds and other fixed income securities. For these
financial instruments, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. Weighted average
variable rates are based on current rates. Weighted average fixed rates are
based on the contract rates. The actual cash flows of all instruments are
denominated in U.S. dollars. The Company invests its cash on hand not needed in
current operations in fixed income securities generally maturing within one year
from the date of acquisition.


                                  MAY 31, 1999

                            EXPECTED MATURITY DATES
<TABLE>
<CAPTION>

                                1999        2000      2001     2002       2003    THEREAFTER      TOTAL       FAIR VALUE
                                ----        ----      ----     ----       ----    ----------      -----       ----------
MARKETABLE SECURITIES:
<S>                           <C>          <C>       <C>       <C>        <C>      <C>         <C>            <C>
Short-term Debt:
   Fixed Rate($)............  $2,404,603     -         -         -         -         -         $2,404,603     $2,403,480
     Average interest rate..       6.30%    N/A       N/A       N/A       N/A       N/A             6.30%
   Variable Rate($).........  $1,000,006     -         -         -         -         -         $1,000,006     $  876,696
     Average interest rate..       9.71%    N/A       N/A       N/A       N/A       N/A             9.71%
</TABLE>


                                       15

<PAGE>   16


                            PART II OTHER INFORMATION


Item 4.   Submission of Matters to a Vote of Security Holders

          The Annual Meeting of Shareholders of the Company was held on April
13, 1999. At the Annual Meeting, Daniel S. Follis and Dr. James I. Ausman were
elected as Directors of the Company, and the terms of office of H. Raymond
Wallace, Bruce J. Barrett, and Robert R. Henry as Directors of the Company
continued after the meeting. 5,545,513 votes were cast for Mr. Follis' election
and 75,262 votes were withheld from Mr. Follis' election, and 5,545,473 votes
were cast for Dr. Ausman's election and 75,302 votes were withheld from Dr.
Ausman's election. There were no abstentions or broker non-votes in connection
with the election of the Directors at the Annual Meeting.

          In addition, at the Annual Meeting of Shareholders, the shareholders
approved an amendment to the Somanetics Corporation 1997 Stock Option Plan to
increase the number of Common Shares reserved for issuance pursuant to the
exercise of options granted under the 1997 Plan by 295,000 shares, from 745,000
to 1,040,000 shares. 5,257,834 votes were cast in favor of this proposal,
335,567 votes were cast against this proposal, and 27,374 votes abstained on
this proposal. There were no broker non-votes in connection with the amendment
to the 1997 Stock Option plan at the Annual Meeting.



Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

               10.1 Revolving Note from Somanetics Corporation to Fifth Third
                    Bank of Northwestern Ohio, N.A., dated April 1, 1999.

               10.2 Third Amendment, between Somanetics Corporation and
                    First Industrial Mortgage Partnership, L.P., dated
                    April 23, 1999.

               27.1 Financial Data Schedule.

          (b)  Reports on Form 8-K

               No reports on Form 8-K were filed by the Company during the
               quarter for which this report is filed.


                                       16
<PAGE>   17



                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                          Somanetics Corporation
                                          -----------------------
                                          (Registrant)




Date:    June 30, 1999                    By:/s/ Raymond W. Gunn
         ------------------                  -------------------
                                          Raymond W. Gunn
                                          Executive Vice President and Chief
                                          Financial Officer (Duly Authorized
                                          and Principal Financial Officer)

                                       17
<PAGE>   18



                                  EXHIBIT INDEX
                                  -------------



EXHIBIT                            DESCRIPTION

10.1     Revolving  Note  from  Somanetics  Corporation  to  Fifth  Third  Bank
         of Northwestern Ohio, N.A., dated April 1, 1999.
10.2     Third  Amendment,  between  Somanetics  Corporation and First
         Industrial Mortgage Partnership, L.P., dated April 23, 1999.
27.1     Financial Data Schedule.







                                       18